The expansion of the world market ensured that the private sector in Australia had to face the task of becoming increasingly competitive internationally. After 1983 political decisions by the federal government, generally supported by the Opposition, recognised this challenge. The economy has been progressively opened in recognition of unavoidable reality, and related policies implemented to assist private sector institutions to meet the challenge. Owners of capital have been encouraged to invest in areas of best result as determined by market-driven returns; managers have been encouraged to pursue best-practice technology, methods of production and personnel management; scientists have been given incentives to develop and deploy front-line technologies; and changes to work practices, award restructuring and union amalgamations have encouraged greater labour productivity. It would make little sense to expose the Australian manufacturing, mining, services and farming private sectors to the full force of the world market without expecting a corresponding change in behaviour from the public sector.

The organisation of the public sector determines many of the input costs to private industry and profoundly affects the national economy's efficiency. Its reform has come to be known under the general heading of ‘micro-economic reform’. The logic of this is that major macroeconomic changes were made during the 1980s: deregulate the financial sector and float the dollar; cut barrier protection; pursue free trade internationally; reform the tax system; rearrange factor shares to the benefit of corporate profits. By the 1990s a corresponding reform process was applied to the public sector to reduce the cost of its services to business.